A remote $43 million island facility could be a game changer for India’s solar sector

One of the major gaps in India’s renewable energy sector is getting plugged.

Despite the low prices and abundance of renewable energy sources, solar power still accounts for just 1.6% of the power generated in India. This is partly because of the transient nature of solar power. Since sunshine is intermittent, solar energy can only be generated during certain parts of the day. That makes storage facilities, which can bank this power for use when sunshine isn’t available, critical. Globally, and particularly in India, storage technology is still nascent and expensive. There’s been little progress in constructing utility-scale solar power plants with energy-storage facilities in India.

But things are slowly changing.

Government-owned mining and coal-based energy producer NLC India is building the country’s first utility-scale solar plant with a battery energy storage in the Andaman & Nicobar Islands. The remote region, located deep in the Bay of Bengal, depends on diesel-based power-generating units, which the solar project seeks to replace.The 20 megawatt (MW) solar-cum-storage plant is expected to be commissioned by April 2019.

Mahindra Susten, the renewable energy arm of the $19 billion Mahindra Group, has quoted the lowest price to set up the project for NLC India at Rs289 crore ($43 million), aMahindra Susten spokesperson told Quartz. The others in the race were solar companies such as Adani and Sterling & Wilson, and energy storage companies like Exide, renewable energy consultancy Bridge to India (BTI) said in a note.

Before NLC India opened the auctions for this project in May this year, the Solar Energy Corporation of India (SECI) and India’s largest power utility NTPC conducted four similar auctions for 35MW of projects in Karnataka, Andhra Pradesh, and the Andaman & Nicobar Islands, but all were scrapped due to high costs.

This pioneering project comes at a time when the solar sector in India is booming, and tariffs have fallen to record lows of Rs2.44 a unit. The country currently has an installed capacity of around 13,650MW of solar power, according to the ministry of new and renewable energy, and is aiming for 100,000MW by 2022. The sector saw investments of over $9.7 billion in 2016 and India has been listed as the world’s second-best market for renewable energy investment by consulting firm EY.